With consolidation in the financial advice on the increase and more firms selectively looking to buy books of fees in a bid to boost the bottom line, there are a number of important considerations for acquirers to take into account in this process.
In buying a book, typically the best approach it is to have a combination of a staged payment arrangements after the actual contract is consummated, which considers client retention. So 12 months after the contract has been consummated, if X fees are still with you, you’ll pay X amount. The best way to do this is over a two or three year period, so this staging process gives you at least some certainty that the fees are going to stick. In this process, it’s absolutely vital that you establish a very good relationship with the vendor if you can.
Another way of approaching this is to put a phase in, phase out arrangement in place. If a vendor is transferring relationships to you, your credibility in the eyes of clients is an unknown factor. However, one thing that’s going to build your credibility is the recommendation of the departing vendor. If you can structure a situation where the vendor is continuing to work on some basis in your business after you’ve bought their fees, you can work through that transference of relationship to boost credibility in the eyes of clients with a view to improving retention.
